Risk Management (BFT 319/3)

MEANING Attempting to identify and then manage threats that could severely impact or bring down t1)e organisation is known as risk management. Generally, this involves reviewing operations of the organisation, identifying potential threats to the organisation and the likelihood of their occurrence, and then taking appropriate actions to address the most likely threats. Traditionally, risk management was thought of as mostly a matter of getting the right insurance. Insurance coverage usually came in rather standard packages, so people tended to not take risk management seriously. However, this impression of risk management has changed dramatically. With the recent increase in rules and regulations, employeerelated lawsuits and reliance on key resources, risk management is becoming a management practice that is every bit as important as financial or facilities management.

Effective risk management is essential for the success of large projects built and operated by the Department of Energy (DOE), particularly for the one-of-a-kind projects that characterize much of its mission. To enhance DOE’s risk management efforts, the department asked the NRC to prepare a summary of the most effective practices used by leading owner organizations. The study’s primary objective was to provide DOE project managers with a basic understanding of both the project owner’s risk management role and effective oversight of those risk management activities delegated to contractors.

The modern world of global finance had its antecedents in two significant events which occurred approximately thirty years ago: the breakdown of the post-war Bretton Woods system of fixed exchange rates between national currencies and the (re-) introduction of option trading in major financial markets emanating from the creation of the Chicago Board of Trade Options Exchange.

Managing financial risks comes down to understanding how to reduce a complex business environment into workable concepts and models. This guide provides readers with the tools they need for dealing with the most important areas of financial decision making. It clarifies the factors that affect the value of a firm.

Operational risk is possibly the largest threat to financial institutions. The operational risk that financial institutions face has become more complex, more potentially devastating and more difficult to anticipate. Moreover, operational risk management is an essential part of the economic activities and economic development in financial institutions. The credit crunch indicates once more that operational risk does not lend itself to traditional risk management approaches.